15 Feb 2012 – Treatment of trading losses tightened up

‘Do it yourself super funds are steadily losing the investment flexibility they have previously enjoyed. In addition to much tougher rules on collectables, DIY funds are now restricted through the tax treatment of any trading activities they engage in, especially share trading but also trading in managed funds, land or rights to investments – derivatives.’

‘Instead of choosing whether to offset trading losses against either capital gains or revenue gains – revenue being income such as dividends and interest – there is now only one choice: all DIY fund investment losses can only be offset against capital gains.’

‘Before the 2011 federal budget, super funds had more flexibility on investment losses, says auditor Matt Heighway of Engage Super Audits. As long as they separately identified the investments as trading stock, they were able to offset losses against revenue.’

‘Trading is buying and selling investments for a short-term profit. It also includes trading in derivatives, which can embrace exchange-traded options over shares, contracts for difference over a range from shares to commodities to managed funds, as well as foreign exchange speculation. While anecdotal evidence suggests this affects just 1 in 100 DIY funds, as there are now more that 460,000 DIY funds this is a potentially significant number.’